Utah company counts on big giveaway to boost bottom line

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A Utah company is in the midst of a highly successful campaign to increase sales revenue. It gives away products for free.

And so far, after just about a month and a half, DAZ Productions Inc. (DAZ for Digital Art Zone), of Draper, has given away more than $150 million worth of the premium version of its software for creating three-dimensional images. But by doing so, the company said earlier this week it has seen a huge increase in sales of its stock images, which generate the majority of its revenue.

The giveaway-away  anyone can download three programs for free at daz3d.com  is part of a strategic shift by new CEO Jim Thornton, who came to DAZ last year from Provo Craft & Novelty, a manufacturer of craft, hobby and education products.

About 80 percent of the DAZ's sales come from its stock of images created by artists that can be imported into software programs and used to make two- and three-dimensional images, such as mythic warriors, busty maidens characters or desert or rainforest landscapes. The company's software provides about 20 percent of its revenue, said Thornton.

By giving away some of its software, DAZ has seen about a 20 percent jump in users and the size of its email list of customers is up about 50 percent in six weeks.

"So by giving away the software, we've just created a huge engagement for our business," said Thornton. "Now we're seeing our customers come back to our store and purchasing the content, and we're capturing the recurring revenue."

The privately held company does not release revenue figures but Thornton said March was its best month ever.

DAZ spun out of Zygote Media Group Inc., of Provo, in December 2000. Its backers include technology luminaires Columbia Capital, Benchmark Capital and Highway 12 Ventures.

Since it became a stand-alone company, DAZ has invested "tens of millions" of dollars in research and acquisitions of content and software, Thornton said.

"It has built this incredible library that makes us the leading provider of 3D content in the world," he said. A company called Digimation makes the same claim on its website, but Thornton contends that website traffic shows DAZ gets many more hits than Digimation, which he says translates into more sales.

In 2009, DAZ merged with Gizmoz, of Tel Aviv, a developer of animation and 3D technologies.

Last year Thornton came on board and brought along Matt Wilburn, from Provo Craft, as chief marketing officer.

Thornton said after a strategic review, the company decided to jettison some products, and lay off staff as a result, in order to concentrate on its 3D content and software.

The company has sold mostly to 3D animators and image makers but is trying to expand its customer base.

"Really what our focus is, and what I think separates us from those who play in the 3D space today, is our efforts to expand beyond the core user of 3D," Thornton said, and to market to those involved in electronic game creation and other image creators.

Dan Farr, DAZ's cofounder, former CEO and now chief strategy officer, said the three applications the company is giving away together would sell for about $800. Neither he nor Thorton would say how long the software giveaway-away would continue.

"It's really quite a valuable giveaway," Farr said.

Users of the software can buy figures or landscapes from DAZ's revamped online store and import them into the software, where they can be manipulated to create animation characters and landscapes, as well as numerous other figures.

The company has about 12,000 images for sale, ranging from around $2 for some to about $150 for a Photoshop bundle of others. The images can be used for a lot of different applications, not just 3D art, including two-dimensional works, said Thornton.

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